Category: Economy

The World Bank has maintained its economic growth forecast for Bangladesh at 5.7% for the upcoming fiscal year 2024-25, despite the government targeting a higher 6.75% GDP expansion. The projection is supported by increased private consumption due to easing inflation and a pick-up in investment. However, input shortages, import restrictions, and high non-performing loans in the banking sector remain challenges for the economy.

Major indices of the Dhaka Stock Exchange (DSE) continued declining for the third consecutive day after the proposed national budget unveiled capital gains tax reintroduction. The benchmark DSEX dropped 0.70% to a three-year low of 5,070 points. The DSE Brokers Association urged the government to postpone the tax move, citing eroding investor confidence and the market’s prolonged bearish trend. Investors are leaving the market due to a lack of good companies and transparency.

The Bangladesh Bank has decided to allow private individuals and companies to form ‘credit bureaus’ to assess borrowers’ loan eligibility and repayment capacity. These bureaus will collect data from sources like the central bank’s Credit Information Bureau and provide lenders with credit ratings, helping make informed lending decisions. With a minimum paid-up capital of Tk 10 crore, the licensed bureaus aim to reduce information asymmetry, increase lending competition, and eventually lower default and interest rates through improved credit information sharing. The central bank has issued guidelines on licensing and regulating these new credit assessment entities.Photo: Star/File

The proposed budget for 2024-25 fiscal year has drawn more criticism than appreciation. While it aims to control inflation, critics argue the revenue-expenditure gap is unrealistic. Reducing corporate tax may boost industries, but increasing tax on existing taxpayers and allowing whitening of black money at a lower rate has drawn flak for being discriminatory. Experts also criticize the reduced allocation for education. Addressing these concerns could make the budget more realistic and people-friendly.Source:prothomalo

In the proposed national budget for the fiscal year 2024-25, significant changes have been made to baggage rules in Bangladesh. The most notable change is that 24-carat gold ornaments will no longer be allowed as part of baggage. Only gold ornaments of 22 carats or lower, up to 100 grams, can be brought in. Additionally, children below 12 years cannot bring in gold ornaments, gold bars, or alcoholic beverages, and unaccompanied baggage will not receive duty exemption facilities. These changes aim to regulate the import of high-value items through baggage.(Bd pratidin English)

Mobile phone users in Bangladesh will have to pay more for talk time and internet usage as the government has increased supplementary duty on these services by 5 percentage points. For every Tk100 recharge, people will now get only around Tk62 for talk time and internet usage, instead of the previous Tk75, as the government’s share has increased to Tk28. Experts criticize this move, saying Bangladesh’s telecom sector already has one of the highest tax rates globally, and further increasing it is a wrong decision.

The Bangladesh Energy Regulatory Commission (BERC) has reduced the price of a 12kg Liquefied Petroleum Gas (LPG) cylinder by Tk30 to Tk1,363, effective from 6pm on June 3. The retail price of LPG has been fixed at Tk113.55 per kg, leading to price reductions for cylinders weighing 5.5kg to 45kg. The autogas price for cars has also decreased to Tk63.53 per liter. BERC adjusts LPG prices monthly based on international propane and butane prices to maintain market consistency. Photo: Representational

The Centre for Policy Dialogue (CPD) revealed that in Bangladesh, the price of coarse rice has increased by 30% over the last 5.5 years, disproportionately impacting the poor. Comparatively, prices of miniket and paijam rice rose by 17-18%. Prices of essentials like lentils, flour, oil, sugar, meat, and onions have also surged alarmingly. Despite having the lowest per capita GDP among 17 countries, Bangladesh spends the most on food at $928 per capita, reflecting a severe cost-of-living crisis for its citizens. Photo: prothom alo

Export prices of Bangladeshi garments have fallen by 8-16% year-on-year in the last eight months due to lower global demand amid inflation, according to BGMEA. Despite a 4.97% growth in garment exports during July-April, it was far lower than the previous year. The BGMEA president urged the government to reduce production costs, continue cash incentives, ensure utilities, and facilitate investment to achieve the $100 billion export target by 2030.

Gas supply across Bangladesh has reduced after one of the two Floating Storage and Regasification Units (FSRUs) was damaged by a stray broken floating pontoon during Cyclone Remal. The Summit Group’s FSRU in Moheshkhali suffered a hit to its ballast water tank, reducing the country’s LNG supply to less than 700 mmcfd from the normal 1,100 mmcfd. An expert surveyor is assessing the damage before the FSRU can resume operations.

International buyers are increasingly preferring to use Delhi’s airport over Dhaka’s Hazrat Shahjalal International Airport for air shipments of Bangladeshi goods, especially garments, due to significantly lower tariffs and charges at the Indian airport. The higher expenses at Dhaka airport make it uncompetitive, leading buyers to transport goods by road from Bangladesh to Delhi despite the longer distance, costing exporters and airlines business.

Fitch Ratings has downgraded Bangladesh’s long-term foreign-currency issuer default rating to “B+” from “BB-“, citing the lingering weakening of the country’s external buffers. However, the outlook is stable, reflecting mitigation of refinancing risks through the IMF program and moderate government debt. The downgrade comes as Bangladesh’s foreign exchange reserves have fallen substantially due to interventions, capital outflows, and informal remittance channels, leaving the country more vulnerable to external shocks despite recent policy reforms.

Bangladesh and Japan have formally begun negotiating an Economic Partnership Agreement (EPA) to allow duty-free export benefits for Bangladeshi products in the Japanese market after LDC graduation in 2026. The first round of talks was held in Dhaka from May 19-23, where both sides exchanged views on negotiating areas like trade in goods, services, investment and dispute settlement. An EPA is crucial for Bangladesh to retain its $1.9 billion annual exports to Japan, which is at risk of facing up to 18% duties post-LDC graduation.

Bangladesh’s allocation for social safety net programs has increased over the years, but nearly a third is spent on civil servant pensions and savings certificate interest payments. Economists argue these should not be categorized as social safety nets, as they inflate the allocation meant for protecting the financially vulnerable population. They recommend redesigning the programs to genuinely support low-income and marginalised groups amid high inflation.

The Centre for Policy Dialogue (CPD) urged the government to reduce bad loans and establish good governance in the banking sector. It recommended devising a comprehensive reform agenda, strengthening commercial banks, upholding Bangladesh Bank’s independence, creating a conducive legal environment, and setting up a banking commission. The think-tank highlighted the alarming rise in non-performing loans (NPLs) in both state-run and private banks over the past decade, eroding public trust in the sector.

Bangladesh’s economic growth, measured in US dollars, has slowed due to the taka’s sharp depreciation against the greenback. While GDP and GNI per capita rose steadily in taka terms, their dollar values fluctuated, suggesting the currency’s devaluation has prevented the economy from fully realizing its growth potential. Restoring exchange rate stability is crucial for Bangladesh to maximize its economic gains. Star Digital Graphics

The National Board of Revenue (NBR) is planning to introduce a new ‘prospective tax system’ from the next fiscal year 2024-25. Under this system, the NBR will announce income tax rates for individuals and companies in advance, allowing them to make better investment and tax plans. Experts and business leaders have welcomed the move, stating it will boost investor confidence and encourage domestic and foreign investment. The new system is expected to replace the existing ‘retrospective tax system’.

HSBC Bangladesh has registered a record profit of nearly Tk 1,000 crore in 2023, making it one of the most profitable banks in the country. The 70% year-on-year profit surge was attributed to a rise in interest income and investment income from treasury bills and bonds. However, the bank’s income from commissions dropped by 21%. HSBC increased its investments in high-yielding treasury bonds but reduced its loans and advances during the year. The bank also witnessed a 17% hike in classified loans.

Bangladesh plans to seek over $5 billion in soft loans from China to ease pressure on its dollar reserves. The funds will be used to support businesses importing raw materials and for budget support. China is Bangladesh’s largest trading partner, with Bangladesh importing goods worth $22.9 billion in fiscal 2022-23. Officials aim for a long-term loan with an interest rate below 1% to address the country’s depleting reserves, currently at $19.95 billion.

Bangladesh has proposed to the IMF to revise down the Net International Reserves (NIR) target for June below $18 billion, as the existing $20.11 billion target appears difficult to achieve due to the prevailing external sector situation. Meeting the NIR target is a condition for securing the fourth tranche of IMF’s $4.7 billion loan programme. Bangladesh has also requested to revise down the tax revenue collection target for June.

A recent study reveals that people who fell into poverty due to the COVID-19 pandemic remain unable to recover their previous economic status amid financial crises and high inflation. The “new poor” lack strong networks, access to loans, and social safety nets, making them vulnerable to further economic deterioration. The study highlights the constraints faced by these households in coping with pandemic-induced shocks and their struggles to overcome poverty.

International clothing retailers and brands are optimistic about Bangladesh’s denim products due to promising business prospects. They are expanding operations in the country as local manufacturers’ response is growing. The global supply chain recovery and Bangladesh’s increasing production capacity and competitive prices have boosted confidence in sourcing denim products from Bangladesh.

Research by a Dhaka University professor revealed that Bangladesh’s stock market is profitable in the short-term but not lucrative for long-term investors. The study found that investors earned profits in the short-run but incurred losses over the long haul, with the yearly market return falling short of risk-free interest rates offered by banks.